Paper Products Company v. Doggrell

261 S.W.2d 127 (1953)

Facts

Doggrell, Konz, (Ds), and Whitaker, Jr., were the sole stockholders in an Arkansas corporation formed by them under the name of Forrest City Wood Products, Inc. with the principal office to be located in St. Francis County, Arkansas. Arkansas requires the articles of incorporation to be filed with the Secretary of State and in the office of the County Clerk of the County in which the corporation's principal place of business is to be located. Ds were Tennessee residents. They left the management of the corporation entirely to Whitaker, a resident of Arkansas. Whitaker inadvertently failed to file it with the Clerk of the County Court. Stockholders of a corporation are liable as partners when the charter is not filed as required by the Arkansas statute. Paper (P) dealt with the corporation and it failed to pay its debts. Forrest City Wood Products, Inc. became bankrupt. P sued Whitaker in Arkansas and won. P then sued Ds in Tennessee. Ds claimed the Arkansas rule was penal in nature and could not be enforced in Tennessee. The court agreed and P appealed.